"The first seminar I was invited to was on global warming and climate change. I had no idea what FREE was or who John Baden was, but the invitation mentioned some of those who had already agreed to attend, and one of them was a scientist I had got to know well, and to trust...I took his selection as a good sign, joined the seminar, signed on for more, and have never been disappointed."

— Professor Thomas C. Schelling, Nobel Laureate Economics

Good Trust, Bad Trust

Many social scientists have found that when people do not trust anyone outside their own clan or village, the level of trade and general prosperity tends to be low. Wealthy societies are characterized by high-trust cultures.

When I mentioned this observation at a recent conference in Bozeman, sponsored by the Foundation for Research in Economics and the Environment (FREE), I was asked a question concerning trust in government. If we lose trust in government, does that mean we are no longer a high-trust society?

Defining Trust

Trust operates in two contexts that are similar but distinct. To trust information means to use it in a positive way to guide thinking on an issue. To trust a transaction means to expect to receive appropriate benefits from that transaction.

For example, I trust John Baden, the organizer of the FREE conference. His commitment to principle is strong. At a dinner during our session, I sat next to Ed Capen, who got to know Baden when Baden ran an energy institute at a university in Dallas. Oil companies liked Baden’s free market advocacy when prices were high. However, when oil prices plummeted in 1986, the industry developed a craving for subsidies. When Baden stuck to his free market economics, he was fired.

Many economists would have found a way to rationalize adopting a new viewpoint more congenial to their sponsors. I trust Baden when he provides information, because he chose to compromise his short-term financial interests rather than his economic principles.

The Scope of Trust

Trust within families is something that can be taken for granted, even in a low-trust society. A high-trust society is one that has found a way for trust to extend to strangers.

Sometimes trust is based on experience that leads one to believe that someone else is virtuous. My trust of John Baden is an example of that.

However, the highest form of trust is trust in the processes followed by other parties. This includes the incentives governing those processes. Information that is developed using scientific methods, with careful consideration of alternative hypotheses and limitations of the data, comes from a reliable process. Transactions are most trustworthy when they take place in a context where similar transactions have proven trustworthy and cheating is easily detected and punished.

For example, purchases from firms that need good reputations in order to attract repeat business and word-of-mouth sales are more reliable than purchases from firms that can survive on one-off, isolated individual purchases. That is because when reputation matters, the incentives serve to protect the purchaser.

Trust in Government: Processes, not People

In the case of government, there is good trust and there is bad trust. Good trust is trust in processes that promote the public good. Bad trust is trust in the virtue of leaders or the wisdom of voters.

If you can trust the processes of government, then that is a good thing. Good trust in government is based on processes that provide for accountability, checks and balances, equal protection, and punishment of official corruption.

Trusting the virtues of government leaders is a bad thing. It tempts people to cede rights and powers to government that are easily abused. The more that our ideology demands virtue from leaders, the more likely it is that our leaders will prove to be evil. As Lord Acton famously put it, "Power corrupts and absolute power corrupts absolutely."

Trusting the "will of the people" is also a bad thing. Democratic majorities can support inferior policies, infringement on people's rights, and even genocide. Popular voting is useful as a check on elites, but not as a tool for overriding the principle of individual liberty.

In conclusion, my idea of a high-trust society differs from that of many elites. Elitist journalists think that a high-trust society is one where we trust the mainstream media. Elitist politicians and activists think that a high-trust society is one where we trust legislators, regulators, and experts to exercise broad authority. In contrast, I believe that a high-trust society is one in which processes ensure that elites are subject to checks and accountability. It is particularly important for legislators, regulators, and experts to have their authority limited and their accountability assured.